After Aetna, Cigna, and Wellpoint all moved into different PBM relationships with CVS Caremark, CatamaranRx, and Express Scripts, it certainly marked the end of much of the debate on whether a captive PBM (i.e., owned and integrated with the managed care company) could compete with the standalone PBMs. There are really only a few big integrated models left including Humana, OptumRx (as part of UHG) and Kaiser with Prime Therapeutics having a mixed model of ownership by a group of Blues plans but run as a standalone entity. Regardless of where the latest Humana rumors take them, it made me think about what the market has become with these new relationships.

Scale matters. All of these relationships and discussions show that there are clear efficiencies in the marketplace.

Drug procurement (i.e., negotiating with the manufacturers (brand and generic) and the wholesalers)

Pharmacy networks (i.e., getting the lowest price for reimbursement with the retail pharmacies)

Rebating (i.e., negotiating with the brand and specialty drug manufacturers for rebates)

Outcomes matter. If scale was all that mattered, there be no room for others in the marketplace. But, we continue to see people look at this market and try to make money. That means that “outcomes” matter in different ways:

Clinical outcomes (i.e., does the PBM have clinical programs or intervention strategies that improve adherence and/or can demonstrate an ability to lower re-admissions or impact other healthcare costs?)

Consumer experience (i.e., does the PBM’s mail order process or customer service process or member engagement (digital, call center, etc) drive a better experience which improves overall satisfaction and overall engagement…which drives outcomes?)

Physician experience (i.e., does the PBM engage the physician community especially in specialty areas like oncology to work collaboratively to drive different outcomes?)

Data (i.e., does the PBM use data in scientifically valid but creative ways to create new actionable insights into the population and the behavior to find new ways of saving money and improving outcomes?)

While I’ve been beating the drug of the risks of commoditization to the market for years, I’m going to make a nuanced shift in my discussions to say that there is still a risk of commoditization and driving down to the lowest cost, but we may be quickly approaching that point. What I’m realizing is that there can be a two tier strategy where you commoditize certain areas of the business and let the other areas be differentiated. And, that this can be a survival tactic where you either outsource the core transactional processes to one of these low cost providers or figure out how to be one of them while creating strategic differentiation in other areas.

It was good because I actually heard things that I’d never heard discussed around specialty pharmacy before. And, as he pointed out, specialty will represent 50% of the pharmacy spend and about $235B in total spend by 2018. This is where everyone is focused and the opportunity for differentiation exists.

He talked about how to get to zero trend in specialty.

He talked about the consumer experience in specialty.

He talked about care coordination and its value in specialty.

He talked about the need for a beyond the pill approach by the specialty pharmacy.

So, what does all this mean? Let me share some highlights:

Specialty pricing is starting higher based on government pricing constraints. You can’t raise price. It’s easier to start high, discount, and/or come down over time.

3.6% of patients drive 25% of costs (not a surprise)…but 43% of their total costs are not from the specialty condition but from their co-morbidities. (Why treating the patient not the condition is critical.)

They are moving from 12-month contracting with pharma to 2-3 month contracts to really keep on top of market conditions.

Coordinated care can drive lower costs in terms of readmissions and other total medical costs.

You can use generics to replace biologics. For example, he showed switching out an HIV biologic costing almost $3,000 / month with 3 generics costing $101 per month. (I’ve never heard anyone else talk about this.)

He also reinforced the fact that today’s specialty benefits are not coordinated across medical and pharmacy. For example, he used the RA example where there are 9 drugs with 4 of them commonly used under the medical benefit and 5 under the pharmacy benefit.

But, the most important thing was their strategy to get clients to ZERO TREND for specialty pharmacy. (It reminded me of the program I developed at Express Scripts where we actually guaranteed a 3-year zero trend…if you followed our very aggressive recommendations.) He outlined the following:

1.5% savings from their formulary

0.5% savings from an exclusive specialty network

1.9% savings from an aggressive generic policy

1.0% savings from innovative pricing

3.6% savings from optimizing site of care

2.5% savings from medical claims editing and repricing

6.0% savings from enhanced prior authorization

He also went on to talk about the consumer experience. I think a lot of specialty pharmacies are thinking about the same things, but there were several things he shared that were new to me. It was exciting.

As I’ve said before, as specialty pharmacies really start to think about the patient and focus on the experience over time, we will start to see more coordination with pharma about going beyond the pill and driving lower total costs.

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The creation of the “softer, gentler” PBM is one of my predictions driven by the rise in specialty pharmacy. While generic fill rates and mail order penetration still matter to earnings, the focus across the industry is on specialty.

This will bring back a focus on how pharma and the PBMs work together which has had a bumpy past. Initially the two were very close. Then, with the rise of generics and more trend programs like prior authorization and step therapy, the PBMs and pharma butted heads frequently.

Of course, the situation for pharma has changed also. They are trying to figure out how to go “beyond the pill” and create new consumer relationship and make money. (Here’s a good article about pharma and digital from the other day.)

And, I think this screenshot from the Barclays Global Healthcare Conference Presentation given by Express Scripts shows that they are focused on this care and delivery intersection by continuing to show the success from the Therapeutic Resource Centers.

So, what do you think? Will the PBMs become more care management focused? Will they integrate with the other care providers? Will this be the beginning of their focus on working with ACOs and PCMHs? Will this change their approach? Will we see PBMs differentiating around key, chronic diseases like the specialty pharmacies have done? Will this create an opportunity for integrated PBMs (i.e., Humana, Cigna, Aetna) to differentiate?

The 7 Sure Things are to help you know what to do with your pharmacy benefit and cover:

Prescription trend is on the rise.

Generics have peaked…and you’re going to feel the difference.

Specialty drives trend. But do you know how much?

Price is King…Not much of a surprise there.

Money matters to members. Cost share does influence behavior.

Adherence is the answer. No one said it was going to be easy.

Past performance is no guarantee of future results.

If you’re managing a pharmacy program and you’re surprised by any of these, I would suggest you look for another job.

So, let’s drill down into the report to see what it shows us:

Their trend numbers were:

o 0.8% for traditional (non-specialty) drugs

o 15.6% for specialty drugs (down from 18.3% in 2012)

o 3.8% overall

While utilization was up 2.1%, the primary driver was price which increased 8.2%. These factors were mitigated by a 6.0% change in mix.

o They hint at an interesting question of whether utilization is growing due to an improving economy. (correlation or causality?)

Their GDR (generic dispensing rate) was 81.4% in 2013. (I’d love their perspective on a maximum GDR since they say it’s peaked.)

I like the chart below which shows trend with and without generics coming to market.

Of course, specialty continues to be the real story in all the PBM reports.

They claim that 53% of total specialty medication costs were paid under the medical benefit in 2012 which is in-line with most projections. (While they give some perspective on what to do here, this would be one thing I would have liked to see broken out in more detail as this is a critical area for PBMs which hasn’t been cracked yet.)

They share the AWP trend broken out below and give some crazy examples of AWP price inflation (e.g., 573% for clomipramine) with some explanation for why this happens.

Here were their top 10 specialty drug categories. The top 5 are the same as the CatamaranRx list, but the bottom 5 are in a different order.

A scary statistic (in isolation) is that over the past 5 years patient out-of-pocket costs for prescriptions have climbed 250%. (But, I think their percentage of cost share has stayed the same. It would be interesting to show this in real dollars and compare this to both price and wage inflation just to hammer home the point.)

They talk about CDHPs (consumer driven health plans) and how that is impacting utilization and cost. (These are often high deductible plans where consumers pay out of pocket until they reach a certain amount…which often really makes the point in early January to consumers. And, can lead to dissatisfaction when that prescription that was $30 in December is now $350 in January.)

They talk about adherence, and they certainly have continued to publish a lot of studies in this space. (They also know have Dr. Will Shrank on their staff full-time after working with him for years. I think very highly of Will as one of the best adherence researchers in the country.)

They give a real high level mention of some of their new efforts around adherence:

o Simpler labels

o Synchronizing refill dates

o Reminder devices

o Digital / mobile tools

They also provide this nice summary of how costs go up and where the savings come from. (Of course, the challenge is in drug classes other than these three and getting clients to give you any credit for the productivity savings and also netting out the program costs.)

On a scary note, they predict that Rx trends may jump back into the double digits for the next 4 years.

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I always enjoy reviewing the PBM Drug Trend Reports. Even though these past two years I’ve been focused more on the care management side of healthcare, I continue to see these two paths colliding in interesting ways in the near future.

Specialty trend was up 14.1% based on a 2.5% increase in utilization and an 11.6% increase in unit cost.

A key point is that specialty now makes up 27.7% of the total drug spend for a payer (and that doesn’t even count the ~50% of specialty drugs billed under the medical benefit).

Diabetes was the standout category within traditional drug classes with increased utilization and price increases. [Which isn’t surprising to those of us working on the clinical side that see huge innovation and investment in the diabetes area – Omada Health, Telcare, and Welldoc (for example).]

While they make a key point with data that member cost share is going down and actual out-of-pocket costs are only going up marginally, I think it ignores the reality that consumers are feeling the pain of out-of-pocket spending more especially with all the High Deductible plans out there.

They do reinforce their previous messaging around waste and also introduce their Health Decision ScienceTM approach. (I personally would have liked to see more on this. How is the blending of Consumerology and the Therapeutic Resource Centers impacting utilization, adherence, waste, clinical outcomes, patient satisfaction, or other key metrics?)

As always, you can dig into their forecasts by drug class. I choose cancer as one area to look at. (While this is focused on the basics, I would have loved more about what’s going on around cancer. How are genetic tests impacting use? What about survivorship? How do Centers of Excellence affect outcomes, drug selection, pricing, and adherence?)

On top of being able to drill down on Medicare and Medicaid, you can also look at a Worker’s Compensation specific version of the drug trends. This is interesting since that business is different than the traditional PBM market and is an area that Express Scripts has gone aggressively after in recent years.

One thing I couldn’t find in the document (which is hard to read in the current format) is the average number of Rxs PMPM or PMPY which is just a good stat that I personally track.

One note I will offer on methodology is the definition of specialty drugs. This could lead to some differences between PBMs as we try to compare their trend numbers. Here’s the definition Express Scripts offers:

“Specialty medications include injectable and noninjectable drugs that are typically used to treat chronic, complex conditions and may have one or more of the following qualities: frequent dosing adjustments or intensive clinical monitoring; intensive patient training and compliance assistance; limited distribution; and specialized handling or administration. – See more at: http://lab.express-scripts.com/drug-trend-report/appendix/methodology#sthash.dhJhFIZs.dpuf”

You can see companies building innovation teams and innovation labs within healthcare. You see lots of new entrants trying to figure out how contribute in this space (e.g., Qualcomm Life). But, some of these just become ivory towers where they pontificate and put out cool ideas. Others disappear because they can never be commercialized. Others fall into the “fast fail” bucket of companies, and only a portion of those actually innovate well.

This is a nice report, but it’s a little too high level for me. It has some great frameworks about what to do and some nice graphics, but it’s not operationally practical (although that may not have been the purpose). Here’s a few things I highlighted:

“Mobile Health – The use of mobile applications and devices to deliver medical information, access or record data, or provide clinical services – has the potential to revolutionize patient care.” [good definition]

“The gap between the current market size and five-year projections is significant.” [so is it a warranted gap or will it get closed…I think it will be a challenge to meet expectations.]

They hold out 3 barriers – entrenched behaviors, reluctance to pay, and fragmented infrastructure. [I would agree but how do I work through these…they provide some thoughts.]

They talk about creating a “must-have app” that would consolidate multiple offerings into a single solution. [I don’t even think this silver bullet approach should be considered…It won’t happen.]

They seem to fall into the traditional trap that people other than the payers and employers will fund these programs (telcos, pharma, device companies). [Everyone wants that, but I think that’s the wrong framework.]

They talk about an option of creating and charging a premium for mHealth offerings because some of them “deliver objectively better outcomes or lower costs compared with traditional health-care offerings”. [Really? That’s great news, but I wouldn’t consider that a fact. I’d say we’re seeing some promising studies.]

They talk about “an orchestrated ecosystem” and integration of data. [This would have been a perfect time to highlight what Vladic is doing or what Dossia is doing.]

There were some things missing that I personally would have called out.

It starts with a great tag line from IBM – “Does Your Kid Have Better Technology Than Your Business?” They reference Steve Case’s framework from a presentation he made (see below):

What I liked about this report is that it’s based on lots of real world examples. (It’s still not operationally helpful, but these are investors not consultants so it met my expectation.) They certainly could have gone deeper to explain why certain companies they highlight got acquired such as Diversinet, Epocrates, BodyMedia, CardioCom, Healthagen, Vitality, and ConsultADoc. But, if I look at their list of companies, I see a lot of the innovative companies that I would have on my list – Proteus Digital Health, Healthrageous, iTriage, TelaDoc, Telcare, Eviti, Change Healthcare, and Asthmapolis. (I know Healthrageous shut down – see postmortem – but I think they had some great vision.)

I also think they’re list of major inhibitors to growth was very believable:

Physician adoption

ROI

Regulatory hurdles

Security and governance

Lack of standards

The report shares an interesting stat that 45% of the companies that applied for their rewards were led by MDs in 2009 while it’s only 21% now. To me that shows the movement of IT and business executives into the healthcare space.

Triple Tree does talk about remote monitoring and CMS which I think is important. While the Veteran’s Administration was mentioned in the BCG report, I think that the government efforts here and influence was generally overlooked.

Overall, two interesting reports. Worth a read although I would choose the Triple Tree report over the BCG one if I had time to only read one.

Two other places that I would recommend going if this topic is interesting are:

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You’ll hear this buzzword – “beyond the pill” – come up every once in a while in a discussion with a pharmaceutical manufacturer. As the drug pipeline has dried up and generics have become the norm for oral solid medications, the question is how do these behemoth companies “pivot” to leverage their massive global footprints, their feet on the street, their deep disease specific insights, and their medications.

I’m a big believer in this strategy. Imagine what they could do in terms of services to wrap around obesity drugs. Imagine how they could support patients with diabetes or with cancer. While the short-term view is that these actions might help differentiate them from a formulary or specialty pharmacy perspective, I would argue that they might actually come out with new business models like Merck is doing with Vree Health.

Ultimately, it all begins with an understanding of several issues from the outside-in:

What are the patient’s expectations for you (pharma) or another entity?

How do they feel about you?

Do they trust you?

How do the other constituents in the care team interact with you? With the patient?

How do you create a culture of empowerment, consumer focus, and transparency to really understand the needs of different constituents, react to them internally, and embrace issues dynamically?

In this consumer experience space, I often look to Bruce Temkin’s work and research. He does a great job at a cross-industry perspective. In healthcare, I’ve been very motivated by the work of Ingrid Lindbergh who was at Cigna and then moved to Prime Therapeutics. She’s my role model for what I want to do in a large healthcare company.

Two things got me thinking about this topic. First, I was struck this weekend that there was research showing that people who struggle to buy food for their families are non-adherent. I really hope that anyone in this field wasn’t surprised by that fact. Of course, the struggle is that everyone working in the field is often constrained by their view of the world which often doesn’t include much experience with poverty.

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I’m always thinking about different ways to blend companies through acquisitions or partnerships. The announcement by NantHealth the other day at HIMSS got me thinking more about it. They are an interesting company from what I can tell although I don’t know anyone there.

Of course, I’ve talked about different PBM plays recently, and I think healthcare has become such a front page issue that companies like McKesson, GE, AT&T, Emdeon, Cisco, Apple, and others are waiting to figure out how and when to buy up some technology plays. I could easily see McKesson jumping in to buy several of the adherence companies that I highlighted a few weeks ago like Proteus. And, I’m sure there’s more from this list of fastest growing healthcare companies that will get snapped up or create some interesting partnerships.

I also believe that health reform will drive some consolidation on the provider and payer side. A friend on Wall Street predicted we’d get to 6 national health insurers. I still think that’s possible – United, Aetna/Cigna, Wellpoint/BCBS, Kaiser, Humana, and ??

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It’s been a few years since I’ve worked on medication adherence solutions. It seems to have become a big focus again in the industry both with the Medicare Star Ratings program and with all the emphasis on waste.

As I started thinking about adherence, I thought it would be good to create a list of solutions and vendors. I couldn’t find one anywhere on the web. So, here’s my initial list of almost 100 companies.

I’ll make this a dynamic list so please comment or send me suggestions to add.

Here’s some old posts on adherence that I think are still relevant here:

By now, the idea of a PBM and who they are is much more of a household item than it was a decade ago. We’ve seen massive consolidation in the industry. We’ve seen PBMs grow in the specialty PBM space. The question I often ponder is what’s next. Here’s some of my thoughts.

Do Nothing. Obviously, there’s a lot to be said for ongoing momentum. The PBMs have shown growth for many years. While the generic opportunity and the mail opportunity has slowed down, there are still opportunities in the specialty space.

Distribution. This seems like an obvious possibility. Why not buy Cardinal, AmerisourceBergen, or someone else? Procurement and distribution are core competencies so I think this makes some sense. But, will that create issues in the current client list and retail pharmacies and PBMs haven’t always had the best relationships. (E.g., Express Scripts GPO with Kroger)

Pharma. This has been debated by a few PBMs, but getting into the R&D space is risky and doesn’t build on their core competencies. What could be more interesting would be them getting into the services space by acquiring a company like IMS or Quintiles.

International. Several PBMs have tried this model. In general, it hasn’t gone anywhere. I think the international collaboration of Walgreens and Boots is really interesting and other retailers have gone international. I don’t see this happening anytime soon with any material impact.

Physician. Having a greater impact in the prescribing process could make a lot of sense. I could see some interesting targets in terms of Allscripts, Cerner, or athenahealth. This has been a challenge for years with a few ventures into the space. (e.g., CVS Caremark and iScribe)

Technology. At the end of the day, the PBMs are large technology companies. Could they see their way into the mHealth space? This space is growing like crazy, and you’re seeing established players get into the remote patient monitoring space (e.g., AT&T and Qualcomm). I could see an acquisition in this area of a telehealth company (e.g., Teladoc) or a device company (e.g., Welldoc). Or, they could build something more organically. On the flipside, they could look at technology platforms to open doors to care management or ACOs (e.g., Lumeris). Alternative, I could see SoloHealth as a really interesting asset.

Insurer. I think this one has some interesting opportunities from a Medicare perspective and from a commercial perspective. Could PBMs create an underwritten product and take on risk? I think yes, BUT I think that could impact their need for reserves and the way the market sees them. That makes me think this is less likely, but possible.

Device Benefit Management. I think several ex-PBM executives have gone out to try to build the “benefit management” concept into the healthcare marketplace in other areas (e.g., IPG). Could an existing PBM do it and cross-sell into their base? Perhaps. But, a stretch. They’re getting big so they want to buy meaningful revenue, create synergies, and then grow it.

Navigation. The most used benefit is pharmacy. Today, consumers touch the healthcare system most frequently through retail and their daily prescriptions. With the ongoing complication of the health benefits, there is a huge need for navigators (and not just in the healthcare.gov use of the term). Think about companies like Health Advocate or Accolade.

Data. With the RxAnte acquisition, it has to make you wonder about PBMs and their data assets. How can they use them differently? Can they create apps? Can they create algorithms to license? What would this look like? What about companies like Proteus? Perhaps, a PBM could consolidate several unique assets along the device, smart bottle, data path.

Condition specific. I could see some PBMs going deep on particular areas like oncology to really build out an oncology practice that did everything from second opinions to case management to end-of-life counseling. Those could all wrap around the drugs. Or, imagine them going into the chronic kidney care space by acquiring a company like DaVita.

Providers. While there could be some interesting synergies here with a large hospital group (e.g., HCA) or some ACO/PCMH players, I see that more of a managed care play for rolling up companies. The ROIC (Return on Invested Capital) is too different in these physical operations that I see that being a struggle. And, I think there’s lots of concerns about the hospital needs over time.

Which path plays out…I don’t know, but I think it’s getting close to time that you’ll see another shift in the market as they try to secure their next 10 years of growth by expanding into something that builds on their core competencies.

I think the other question would be if they focus on differentiation by really showing material differences in outcomes and engagement rates and look at how they show an overall health ROI not just Rx specific. That would be where I would place my bets and look at which of these options support that. Maybe we’ll see a PBM X (like Google X) doing some strategic long-term deals to change the overall healthcare roadmap.

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Happy New Year! 2013 has been an interesting year in healthcare with 2014 promising many more exciting developments. A few of the biggest stories from 2013 include:

Healthcare.gov – the politics, the drama, and the missteps

Healthcare transparency and costs – new companies, new revelations, and an entire Time magazine focused on it

Healthcare engagement – ongoing focus on how to get consumers to engage

mHealth and QuantifiedSelf – apps and devices proliferate

Investment – a huge jump in VC and angel funding for healthcare

ACOs – do they work or not

Big Data – so much data…so many opportunities

Here’s my predictions for 2014:

Transparency – The race to bring cost data to the forefront of the consumer mindset will move from a radical concept to an expectation. With increased out-of-pocket costs and HDHPs, consumers will expect access and information to cost data. They will look for systems that can predict what they need and push data to them in a timely fashion using location based services and predictive algorithms.

Exchanges – With big companies trying the private exchanges and moving their employees to the federal exchange, we’ll see the market holding its breadth to see what happens. If this drives success on both sides of the equation – employers and payers, you can expect a large jump in this direction later in the year.

Mobile – The traditional member website will continue to die a slow death without mobile optimization in place. More and more consumers will access the healthcare system through a smart phone or device like an iPad. This will drive healthcare companies to figure out how to embrace user design and member experience in new ways as they strive to provide the sustainable app that consumers use more than a few times.

Providers – Providers will continue to cautiously embrace pay-for-performance, value-based healthcare, and models like ACOs and PCMHs. They will want them to work, but they will continue to look for the Tipping Point in which their overall panel is part of these programs. Providers will also begin to modify their workflows using technology based on Meaningful Use and the ubiquity of technology.

Engagement – Consumer engagement in healthcare will continue to be the elusive Holy Grail. Companies will try behavioral economics, incentives, and mass personalization to try and get consumers to understand healthcare and take actions to improve their health. There will be more shifting to include caregivers and embrace social media (e.g., Facebook) and peer-to-peer networks. We will start to see documented case studies and results in terms of improved outcomes.

Devices – While 2013 was the year of device proliferation, we will see the number of people (early adopters and QuantifiedSelf groupies) maxing out. I expect some further consolidation and a dip in adoption rate as we move into the period of disillusionment. Devices will be less about a standalone solution and look at how they integrate with the smart phone and existing systems (at work and home). Like smart pills and smart clothes, this will lead to increased data and integration into daily life. This will require collaboration with providers and employers to figure out how to come through this period.

Value-based – CMS will continue to be a big driver in pushing new payment models around healthcare as they struggle to figure out how to slow the tidal wave of costs coming in Medicare and Medicaid. This will meet up with some of the progress in the commercial space with ACO and PCMH models leading to an evolving path in terms of how drive value. This won’t be the breakthrough year, but we’ll see meaningful progress.

Investments – I don’t see any slowdown in healthcare investments. Our health issues aren’t going away in the US or abroad. China is just emerging with a long list of health issues and technology is creating new solutions in 3rd World countries.

Pills Plus – With pharma struggling with how to reinvent itself, they are going to look at new solutions like Merck is doing with Vree Health. This will cause them to look at many of these trends and how they wrap services, technology, and incentives around their medications.

Specialty Care – Specialty pharmacy will continue to be a big growth driver with novel innovations coming down the pipe. But, these pharmacies will realize that they can’t work in a vacuum. They have to do a better job at integrating care management into their services and partnering with Case Management companies to holistically treat the patient.

Metabolic Syndrome – The overall global issues of obesity and diabetes will become a huge weight around the shoulders of the healthcare system. While the focus will continue to be on the complex cases requiring massive dollars, the majority of people will be struggling with a chronic disease. Metabolic Syndrome will become a big focus for payers, employers, and health services companies as they try to find ways to prevent further complications.

Prevention – While I don’t expect a huge shift here, I think we’ll start to hear more voices on the perimeter yelling about why we only spend 5% of our dollars on prevention. They’ll point out other models outside the US spending more with better outcomes. Health Reform will begin to enable some change here, but it will be slow.

Community Based Care – With more people coming back into the healthcare system with Health Reform, there will be a greater need for location based access to healthcare. This will involve clinics but will be much broader. Companies will need to look at how they embrace community resources like churches to engage the disengaged and poor who don’t trust the system and have limited access to the traditional channels.

With the new JD Powers survey, the gap between retail pharmacy satisfaction and mail order has widened. The average mail order satisfaction score was 797 for mail versus 837 (out of 1,000) for retail.

I think one key comment from Scott Hawkins, director of the healthcare practice at JD powers was:

“One of the key things we’ve seen in the data is that if someone is feels compelled to use a mail-order [pharmacy] their satisfaction score is going to be lower than someone who chooses to use it on their own.” (From Nov 2013 Employee Benefits News article by Andrea Davis)

If I was still at a PBM, I’d push to see the results broken out both ways so I could compare apples to apples the then say the drag was from clients choosing mandatory mail.

The two I find the most interesting are Prime Therapeutics and OptumRx as both of them have moved their mail order services in house in the past few years and seem to be doing well with it. Aetna has outsourced their solution to Caremark and Cigna just recently outsourced their mail order to Catamaran which wasn’t on the list (but may be in the survey).

This is an interesting dilemma. At this point, I think everyone is pro e-prescribing even if it’s simply for the benefit of reducing errors. But, I think the original intent of the solutions were to do a lot more than reduce errors.

The hope was to improve adherence (which I think may have been too lofty). The idea was that e-prescribing would reduce the abandonment rate at the pharmacy. I’m not sure picking up a prescription is the same as taking a prescription. And, taking a prescription once isn’t the same as staying adherent over time.

Fewer than half (47.5%) of the 200 PCPs polled said they have access to formulary information when e-prescribing, and fewer than a third said they have access to prior authorization (31.0%) or co-pay (29.5%) information. Among physicians with formulary information access, that information was available 61.1% of the time and was said to be accurate 68.6% of the time.

Physicians with an EMR (54.1%) were more likely to have access to formulary information than physicians without an EMR (29.6%). And differences were seen depending on the EHR vendor: Allscripts physicians (32.2%) were less likely to have access to this information than “All Other” software suppliers (60.5%), Epic physicians (62.5%) and eClinicalWorks (68.8%).

Another big effort that e-prescribing and integration with EMR was going to have was to push utilization management (UM) to the POP (point of prescribing) rather than having the pharmacy and the PBM dealing with it. I never really thought this would work. If the information isn’t there or they don’t trust the information, the prescriber isn’t going to want to deal with this. It’s already work that they let their staff handle and isn’t something they want to deal with during the patient encounter.

While e-prescribing is definitely here to stay and becoming the norm, the question is whether it’s creating simply a typed “clean” Rx to transmit electronically or whether it’s actually an intelligent process which will enable better care.

Miller: We obviously have a long-term strategy. This has sent a loud message to the marketplace that we have got to preserve the benefit for patients and plan sponsors and do things to rein in costs. As there are more products in the marketplace that are interchangeable, we’ll do more to seek the best value for our members. This is just the beginning of a multi-step process over the next several years.

Will there be more to come? Of course. The PBMs have to make a significant show of lowering the number of formulary drugs especially in the oral solid (traditional Rx) space to make the point to the pharmaceutical manufacturers that they control market access. This is critical for them to create more opportunities in the specialty Rx space around rebates. (Here’s the 2014 Express Scripts exclusion list)

Additionally, this is a low risk strategy for several reasons:

The disruption is minimal. While 780,000 people sounds like a lot, it’s still just 2.6% of the population covered by these formularies. The savings the employer will generate per disrupted member will pay for the extra customer service needed. (Harsh reality to some people…I know)

As I’ve discussed before, the margins are in specialty pharmacy and mail order generics not in branded drugs which represent less than 20% of all drugs. Therefore, this is a good place to make a stand.

From an old JP Morgan analysis from 2011, Lisa Gill estimated the PBM profits to be (all in 30-day equivalents):

$1.69 retail brand drug

$2.03 mail brand drug

$3.00 retail generic drug

$13.00 mail generic drug

This is based on a clinical review by an independent P&T committee. Therefore, this is aligned with the health reform focus on outcomes and value.

The cards may typically be for only 90-days, but most people that drop off therapy or titrate to other strengths do so in the first 90-days so perhaps this is saving some money.

Of course, it’s for brand drugs not generics. That’s the business model we’ve created in this country where generics are priced at pennies so there is no marketing to support those products. It’s the PBMs and pharmacies that do the marketing for generics since they are the ones making money here.

I’m not sure the consumer cost is the issue. That’s marketing 101. Don’t most consumers understand this issue that sales and coupons drive you to build loyalty often to higher priced products. I think the debate here needs to stay on the payer who pays 70-80% of the drug costs. They are the ones who really have an issue here since they don’t control the decision made in the market.

This one doesn’t seem to be going away, but I’m not seeing any net new information.

This seems like the type of headline you’d expect to see in a 3rd world country not the US. But, we’ve been talking about drug shortages for years, and while it may be better in a few areas, cancer isn’t one of them.

I get to talk about one of my favorite topics which is how health reform is driving change in the industry and enabling new opportunities for the pharmacy / pharmacist.

You get to listen to me for 90-minutes so I’m hoping to find some great examples, data, and insights to get you thinking hard about your business and the white space here. I hope to see some of you there. If interested, I’m passing on a discount code they offered to me as faculty.

Those of you who know me know that I’ve been a huge advocate for generic prescriptions since the early part of my PBM/pharmacy career in 2001. It wasn’t long ago that I talked about unresponsible reporting when slamming generics and scaring the population. But, we all enjoy a good conspiracy theory which is about the only thing that makes sense reading the new Fortune article – Dirty Medicine – about Ranbaxy. Both articles are written by the same author, but this one scares me a lot more than the other one. This article reads like a fiction book but appears to be true. It should scare you also and put a spotlight on the FDA.

Here are a few things from the article.

On May 13, Ranbaxy pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn’t meet specifications, and making intentionally false statements to the government. Ranbaxy agreed to pay $500 million in fines, forfeitures, and penalties — the most ever levied against a generic-drug company.

The company manipulated almost every aspect of its manufacturing process to quickly produce impressive-looking data that would bolster its bottom line. “This was not something that was concealed,” Thakur says. It was “common knowledge among senior managers of the company, heads of research and development, people responsible for formulation to the clinical people.”

It made clear that Ranbaxy had lied to regulators and falsified data in every country examined in the report. “More than 200 products in more than 40 countries” have “elements of data that were fabricated to support business needs,” the PowerPoint reported. “Business needs,” the report showed, was a euphemism for ways in which Ranbaxy could minimize cost, maximize profit, and dupe regulators into approving substandard drugs.

But, we know that generics have worked. People have gotten better so one has to assume this isn’t a massive fraud especially when 50% of generics have traditionally been made by the brand manufacturers themselves who would never risk their companies to do what Ranbaxy did. So, it made me wonder about the Placebo Effect. Did some drugs work simply because of that? Is there anything else that would make sense for why this wasn’t discovered more quickly?

I’m shocked that the PBMs, pharmacies, manufacturers, associations, wholesalers, and others aren’t out talking about this. I would want to let the public know that this isn’t a systemic problem, but is one contained to one instance and that quality will be maintained…but maybe no one cares?

While we are generally a society focused on innovation from start-ups (and now all the incubators like Rock Health), there are a few big companies that are able to innovate while growing. That’s not always easy and companies often need some catalyst to make this happen. Right now, there are four established healthcare companies that I’m watching closely to track their innovation – Kaiser, United/Optum, Aetna, and Walgreens. (Walgreens has made the Fast Company innovation list 3 of the past 4 years.)

Let’s look at some of the changes they’ve made over the past 5 years. Looking back, I would have described them as an organic growth company with a “not-invented-here” attitude. Now, I think they have leapfrogged the marketplace to become a model for innovation.

“Today’s announcement marks another step forward in establishing an unprecedented and efficient global pharmacy-led, health and wellbeing network, and achieving our vision of becoming the first choice in health and daily living for everyone in America and beyond,” said Gregory Wasson, President and Chief Executive Officer of Walgreens. “We are excited to be expanding our existing relationship with AmerisourceBergen to a 10-year strategic long-term contract, representing another transformational step in the pharmaceutical supply chain. We believe this relationship will create a wide range of opportunities and innovations in the rapidly changing U.S. and global health care environment that we expect will benefit all of our stakeholders.”

“With this service expansion, Take Care Clinics now provide the most comprehensive service offering within the retail clinic industry, and can play an even more valuable role in helping patients get, stay and live well,” said Dr. Jeffrey Kang, senior vice president of health and wellness services and solutions, Walgreens. “Through greater access to services and a broader focus on disease prevention and chronic condition management, our clinics can connect and work with physicians and other providers to better help support the increasing demands on our health care system today.” (from Press Release)

This is something for the whole pharmacy (PBM, pharma, retail, mail, specialty) industry to watch and model as I talked about in my PBMI presentation (which I’m giving again tomorrow in Chicago). It reminds me of some of the discussions by pharma leaders about the need to go “beyond the pill”.

Today, I’m giving my presentation at the PBMI conference in Las Vegas. This year, I choose to focus on the idea of shifting from fee-for-service to value-based contracting. People talk about this relative to ACOs (Accountable Care Organizations) and PCMHs (Patient Centered Medical Homes) from a provider perspective. There have been several groups such as the Center For Health Value Innovation and others thinking about this for year, but in general, this is mostly a concept. That being said, I think it’s time for the industry to grab the bull by the horns and force change.

If the PBM industry doesn’t disintermediate itself (to be extreme) then someone will come in and do it for them but per an older post, this ability to adapt is key for the industry. While the industry may feel “too big to fail”, I’m not sure I agree. If you listened the to the Walgreens / Boots investor call last week or saw some of things that captive PBMs and other data companies are trying to do, there are lots of bites at the apple. That being said, I’m not selling my PBM stocks yet.

As I mentioned a few weeks ago (2/2/13), I wanted to test and see if healthcare companies would respond to consumers via Twitter. To test this, I posted a fairly general question or message on Twitter to see the response (see below). Of the 23 companies that I sent a message to, only 12 of them ever responded even after 6 of them received a 2nd message. Those results are shared below. What I also wanted to look at was the average time to respond along with which group was more likely to respond.

PBMs – All of the 3 PBMs that I reached out to responded. (This could be biased by my involvement in this space since two of them e-mailed me directly once I posted a comment.)

Pharmacies – Only 2 of the 4 retail pharmacies that I reached out to responded.

Disease Management Companies – Only 1 of the 3 that I reached out to responded. (I was surprised since Alere often thanks me for RT (re-tweeting) them, but didn’t respond to my inquiry.)

Managed Care – 5 of the 7 companies that I reached out to responded. (For Kaiser, they responded once I changed from @KPNewscenter to @KPThrive.)

Health Apps or Devices – Only 1 of the 5 companies that I reached out to responded. (This continues to surprise me. I’ve mentioned @FitBit on my blog and in Twitter numerous times without any response or comment.)

Pharmaceutical Manufacturers – Only 1 of the 3 companies that I reached out to responded. (This doesn’t surprise me since they are very careful about social media. @SanofiUS seems to be part of the team that has been pushing the envelope, and they were the ones to respond. I thought about Tweeting the brands thinking that those might be monitored more closely, but I didn’t.)

I will admit to being surprised. I’m sure all of these companies monitor social media so I’m not sure what leads to the lack of response. [I guess I could give them the out that I clearly indicated it was a test and provided a link to my blog so they could have chosen not to respond.]

Regardless, I learned several things:

Some companies have a different Twitter handle for managing customer service.

Some companies tell you to DM (direct message) them to start a dialogue.

From a time perspective, I have to give kudos to the Prime Therapeutics team that responded in a record 2 minutes. Otherwise, here’s a breakout of the times by company with clusters in the first day and approximately 2 days later.

Company

Response Time (Hrs:Min)

Prime Therapeutics

0:02

Aetna

1:12

LoseIt

1:19

Healthways

2:07

Walmart

3:01

Express Scripts

8:35

Kaiser

29:22

BCBSIL

47:32

OptumRx

47:39

BCBSLA

48:18

Sanofi

53:30

I guess one could ask the question of whether to engage consumers via Twitter or simply use the channel more as a push messaging strategy. The reality is that consumers want to engage where they are, and there are a lot of people using Twitter. While it might not be the best way to have a personal discussion around PHI (Protected Health Information) given HIPAA, it certainly seems like a channel that you want to monitor and respond to. It gives you a way to route people to a particular phone number, e-mail, or support process.

As Dave Chase said in his Forbes article “Patient engagement is the blockbuster drug of the century”, this is critical for healthcare companies to figure out.

The CVS Caremark team told me that they actively monitor these channels and engage with people directly. I also talked with one of the people on the Express Scripts social monitoring team who told me that they primarily use social media to disseminate thought leadership and research, but that they actively try to engage with any member who has an actionable complaint. They want to be where the audience is and to quickly take the discussion offline.

If you want to see the questions I asked along with the responses, I’ve posted them below…

When you think of potatoes, where do you want them to come from? Idaho

When you think of citrus, where do you want it to come from? Florida

When you think of US wine, where do you want it to come from? Napa Valley

When you think of generic drugs, where do you want them to come from? [company?, geography?]

This vacuum is a big problem in terms of commoditization. People don’t think of Teva or Ranbaxy or some other generic company. The average consumer probably doesn’t know who they are. And, they’ve competed based on price for years. If I was the CEO of Teva, this would be the number one challenge I would pose to my staff which was how do I get consumers to ask for my generic version of the drug. The next question should be what would we do to justify this?

For the first time, I think that they have a similar problem that brand pharma does which is how to create an offering not just a pill. The quote below from the CEO of Novartis, tees it up well.

“I also started to shift our business away from a transactional model that was focused on physically selling the drugs to delivering an outcome-based approach to add value beyond just the pill. I really believe that in the future, companies like Novartis are going to be paid on patient outcomes as opposed to selling the pill.”

And, I think this reflects what Sanofi has been experimenting with in terms of diabetes for several years. They launched their iBG Star Blood Glucose Meter to get into the meter space. Sanofi also has heavily invested in social media to give them direct engagement and feedback from consumers. Both of these begin to create more consumer branding for them as an entity.

I’ve talked about this several times over the years based on a book that one of the E&Y partners wrote when I was there called BLUR which was about blending products and services to create offerings. I think this notion combined with the lessons learned that commodities like potatoes have gone through in branding their products offer some insights into what pharma has to do to shift their positioning in the value chain. This is part of what I’ll be discussing at the upcoming PBMI conference where this shift to outcomes based contracting and focus for the industry is critical to long-term survival and differentiation.

I must admit that I’ve heard very little about this decision from the Federal Appeals Court for the Second Circuit of Manhattan that decided that discussing off-label uses for prescription drugs was an issue of free speech. This could change the way pharmaceutical manufacturers interact with physicians. It could change the job of the pharmaceutical rep. It could change how clinical trials are done. It could change how prescriptions are used. It could also lead to a whole new set of prior authorizations by companies that actually have to actively manage off-label usage as it becomes widespread.

On the other hand, I wonder if this door hadn’t already been opened. Have you looked at some of the peer-to-peer (P2P) healthcare websites out there or the disease based communities (e.g., PatientLikeMe or CureTogether)? Patients are already talking about what medications they are using to treat their diseases and their symptoms. Don’t you think those are leading to requests to the provider and discussions with them about off-label utilization?

And, I’m sure that Dr. Google has helped many patients identify other uses of medications. This process (to the best of my knowledge) is completely un-managed. It’s a popular enough topic that Consumer Reports talked about it earlier this year and even put together the following table on drugs commonly used off-label.

* Not meant to be a comprehensive list. Many of the drugs listed here are also available as generics.

** Does not imply that use is clinically appropriate or inappropriate, or beneficial or not.

***To find out if a drug’s off-label use is supported by evidence, click on the medication name.

I would imagine that pharma is going to tip-toe through this open door not simply crash through it. They’re generally risk adverse so their discussions of off-label utilization will be fact-based (to limit exposure) even if (as we all know) statistics can lie. I would suspect (as I’ve seen on other blogs) that this will ultimately go to the Supreme Court before anyone really takes advantage of it.

I guess I’d also point to the issue that physicians have responsibility here. They prescribe off-label today. Here’s what the FDA says about this:

Good medical practice and the best interests of the patient require that physicians use legally available drugs, biologics and devices according to their best knowledge and judgement. If physicians use a product for an indication not in the approved labeling, they have the responsibility to be well informed about the product, to base its use on firm scientific rationale and on sound medical evidence, and to maintain records of the product’s use and effects. Use of a marketed product in this manner when the intent is the “practice of medicine” does not require the submission of an Investigational New Drug Application (IND), Investigational Device Exemption (IDE) or review by an Institutional Review Board (IRB). However, the institution at which the product will be used may, under its own authority, require IRB review or other institutional oversight.

One way to begin to manage this would be to require the use of diagnosis codes (Dx) on all prescriptions. This would at least great a way of tracking how the medications are being used and allow for better technology oversight across the provider, payer, pharmacy, and PBM.

I was talking with some friends at a PBM a few months ago and they were talking about putting Lipitor back on formulary (i.e., the covered drug list) that they took off two years ago. It made me wonder about what a confusing message that is to consumers.

For years, you are taking Lipitor. All of a sudden, Lipitor moves to the 3rd tier because Zocor goes generic. You can stay with the drug and pay a lot more or try a new drug. Now, 2 years later, Lipitor is back in favor because the manufacturer has offered enough rebates to make the branded drug cheaper than some of the generics. Great for the manufacturer who extends the life of their drug and reaps economies of scale for a while longer.

But, for consumers, this means another visit or call to the MD. It may mean more lab tests. It means changing prescriptions again which could trigger drug-drug interactions or other issues. It changes physician’s information and sets them up for more calls.

Obviously, changing for clinical reasons is one thing. Trying to move marketshare and failing is another. And, simply flip-flopping to save pennies is not logical (to me anyways). Imagine if your provider was in network one year; out the next; and then back in. I am sure it happens, but it is a pain.

Hopefully, the savings to the employer, consumer, and benefits to the PBM outweigh any disruption issues.

I guess the question here (as it often is) is alignment of incentives. I had to wonder the other day when a friend at a large managed care company told me that their PBM wouldn’t implement certain programs for them since they were in the PBMs best interest. BUT…they save the patients and the MCO (their client) money. Wouldn’t you at least offer to do them for a fee that covered your lost profit? (maybe I’m being too practical here)